Alem Hagos (Phd)Gzat Tarekegn2025-04-092025-04-092022-04-12https://etd.aau.edu.et/handle/123456789/5340Since extending credit is one of the primary sources of revenue for commercial banks, the credit risk associated with that loan has an effect on the profitability of bank. The purpose of this study is to examine the effect of credit risk on profitability in six sample Ethiopian private commercial banks using panel data from 2010 to 2020. The study employs a quantitative approach and relies on the description of EViews 10 outputs, with empirical analysis conducted using a fixed effect regression model. In the model the researcher define Return on Asset (ROA) as profitability indicator while nonperforming loan ratio, capital adequacy ratio, loan loss provision ratio, liquidity ratio, bank size, interest spread rate, inflation and GDP as credit risk indicators. Secondary data used for six banks which stayed in the industry for twenty or more years among sixteen private commercial banks which are operational at the moment in Ethiopian banking industry. Data for this analysis obtained from banks‟ annual reports, National Bank annual reports, Ministry of Finance, and Economic Development. The regression result shows that non-performing loan ratio and loan loss provision ratio show negative and significant effect on profitability of private commercial banks in Ethiopia. However, capital adequacy ratio, bank size, liquidity ratio and GDP show positive and significant effect on profitability of private commercial banks in Ethiopia. The research concluded that credit risk has significant effect on profitability of private commercial banks in Ethiopia. Hence, the study recommend in support of each variable for private commercial banks in Ethiopia needs strong credit risk management policy by learning from other developed countries that have better experience in the industry, improving performance needs well established standards and overall objectives to reduce the level of credit risk exposures.enThesis